LITTLE ROCK (AP) — Arkansas’ proposal to use federal Medicaid dollars to purchase private insurance for thousands of low-income residents will benefit everyone in the state by cutting healthcare costs and improving access, the state said Monday in a draft of its application to the federal government.

The Department of Human Services released the draft of the waiver it plans to submit to the federal government for its “private option” plan to expand insurance coverage to 250,000 residents. Gov. Mike Beebe signed the plan into law earlier this year, but it still must win approval from the U.S. Department of Health and Human Services.

Beebe, a Democrat, and Republican legislative leaders touted the plan as an alternative to expanding Medicaid’s enrollment under the federal health care law.

Under the private option law, Arkansas would accept the federal money allocated for Medicaid expansion under the federal health care overhaul and would instead use it to buy private insurance for about 250,000 eligible low-income residents. Those individuals who earn up to 138 percent of the poverty line — or $15,415 per year — would purchase subsidized private insurance through the state’s insurance exchange.

The waiver mostly mirrors the state law, which says the private option won’t be implemented unless federal officials agree. In it, DHS says the cost of covering people under private option will be comparable to covering them under expanded Medicaid.

“All Arkansans, regardless of the underlying subsidy for their health insurance, will benefit from improved quality and reduced costs spurred by the demonstration,” DHS said in the waiver. “And all Medicaid beneficiaries, including those served through fee-for-service Medicaid will benefit from spreading the growing Medicaid population across a broader network of providers.”

DHS said it will accept public comments on the plan over the next 30 days before submitting the waiver. The department said it will hold a public hearing July 2 in Little Rock and another one July 8 in Fort Smith.

DHS Director John Selig said the public hearings and comments received could lead to some changes, but said the law approved earlier this year doesn’t allow much flexibility on the overall approach for expanding coverage. Selig said DHS talked with lawmakers and federal officials as they drafted the waiver.

“There’s not room to change things that would cause to be in conflict with the legislation,” Selig said. “But there’s lots of room on how you implement different pieces where somebody might say it may be easier or better if you did this process in this fashion.”

DHS said that it plans to submit the waiver on Aug. 2 and hoped to receive federal approval by Oct. 1.

DHS is finalizing its request to move forward with the plan as opponents hope to repeal it. A group called Arkansans Against Big Government is gathering signatures to place on next year’s ballot a referendum on the private option law. The group has until Aug. 15 to submit at least 46,880 signatures from registered voters.